Index. A Inventory valuation, 199. Landscaping, 209

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1 Index A Inventory valuation, 199 Academic prize income, 134 Investigation of site, 210 Accounting net income vs. tax Landscaping, 209 net income, 41-2, Lease cancellation cost, 209 Accounting depreciation vs. Life insurance premiums, tax depreciation, 48-9, see 209 also Capital cost allowance Meals and entertainment, (CCA), Cumulative eligible 41, 205 capital (CEC) Motor vehicle, 42-3 Accrued salary and bonus, Personal expenses, 118, Recreational facilities, 41, Capital outlay or loss, Club dues, 41, 203 Reserves, 42, Conventions, 41-2 Scientific research and Disability-related experimental development, modification to building, Tax payments, Discount on debt Utility service connection, obligations, Donations, 211 Accounts receivable, allowance Employers contributions to for bad debts, , RPP/DPSP, Financing expenses, 204 Accounts receivable, sale of, Foreign advertising, General limitation, 203 Accrual accounting, 38, 199 Home office, , 208 Acquisition of control, Interest and penalties, 93-4, Active business assets,

2 Active business income, 146 Additional amount credit, 170 Additional refundable tax (ART), CFE Tax Attribution, 182-7, see also Corporate attribution; Subsection 75(2) Automobile, see Motor vehicle Avoidance transactions, 17 Adjusted cost base (ACB), 66 Identical properties, 73-4 B Adoption expense credit, 168 Barter transaction, 16 Affiliated persons, 86-9 Basic asset test, Age credit, Aggregate investment income, Basic personal amount tax credit, 157 Bonus and salary accrued, Allowable business investment loss (ABIL), Boot, see Section 85(1) Allowances, rollovers Amalgamations, Bursary, 134 Annuity income, 134 Business, 8, 38-9 Arm s length, see Non-arm slength Business income Arm s length share-for-share exchange, 278 Arm s length sale of shares by corporation, Defined for tax purposes, 37-9, 99 Business investment loss (BIL), Business loss, 46-7 Articles of continuance, 24, 27 Non-capital loss, 47 Asset writedowns, 203 C Associated corporations, 230-5, see also Small business Canada employment credit, deduction; Scientific 159 research and experimental Canada Pension Plan (CPP), development (SR&ED) 99 At risk amount, 301 Tax credit,

3 Index Canada Revenue Agency Capital gains, (CRA), 6 Charitable donations, 211 Canadian-controlled private Eligible small business corporation (CCPC), 80 corporation shares, 86 Capital cost, 49 Foreign currency, Capital cost allowance (CCA), Replacement property rules, Available for use, 55 Reserve, 74-8 Class 8, separate class, 52, Taxable, Capital gains exemption, 145- Class 10.1, passenger 54 vehicles over $30,000, 59 Capital loss, see Net-capital Class 13, leasehold loss improvements, Capital property Class 14, intangible assets, Adjusted cost base (ACB), Class 29/class 43, Capital gain, 65-6 manufacturing and processing equipment, 60 Capital loss, 65-6 Class 43, manufacturing and Defined, 65-6 processing equipment over Carry over, 67-9 $1,000, 60-1 Change in use, 81-3 Dispositions, 51 Half-net rule, 56-8 Charitable donations Rates, 50-1 Credit for individual, 156, Recapture, 51-2 Deduction for corporation, Rental property rules, Short taxation years, 56-8 Child care expenses, Terminal loss, 51 Undepreciated capital cost Child support payments, 134 (UCC), 49 Child tax credit, 172 Capital dividends, Children s arts tax credit,

4 CFE Tax Children s fitness tax credit, Cumulative net investment 165 loss (CNIL), 153 Club dues, see Recreational D facilities and club dues Death benefit, 192 Commissioned salesperson, Death of taxpayer, Common Final Evaluation Debt forgiveness, 109 (CFE), 1, 2 Debt obligations, discount on, Common law, Common-law partnership, 9- Deductions from employment 10 income, Connected Deductions from income, Corporations, defined, 80 other, Consolidation, 8 Deferred Profit Sharing Plan (DPSP), 204 Construction of building, 55 Disability-related modification Control expense, 210 Acquisition of, Disposition, 66-7 Corporations, defined, 12-3 Election re: Canadian Conventions, 41-2 securities, 72 Convertible securities, Income versus capital, 71-3, see also Capital gains; Corporate attribution, Capital loss Corporate reorganizations, Dividend, deemed, , , 274, Counting days, tip on, 23 Dividend refund, Cumulative eligible capital Dividend tax credit, (CEC), 61-5 Dividends from Canadian Cumulative eligible capital corporations, 113-6, amount (CECA), 61-5 Dues, 203 Dispositions, 62 Recapture, 62 Terminal loss,

5 Index E Financing expenses, 204 Education credit, Fines and penalties, see Elections, 17 Interest and penalties Eligible dividend, 114 First time homebuyers tax credit, 166 Eligible small business corporation shares, 86 Foreign advertising, 208 Employee benefits, 102-3, see Foreign currency transaction, also Taxable benefits 16-7 Employee stock options, 70-1, Capital gain or loss, , 142-3, 203 Foreign reporting, 34 Employment income, 99 Foreign tax credits, 30, 174-8, Deductions from, Employer obligations, 99 G Versus self-employment or business income, Gambling winnings, 116 Employment Insurance (EI), General Anti-Avoidance Rule 41, 99 (GAAR), 17-8 Tax credit, 164 General rate reduction, 214 Equity method, 8-9 Goods and Services Tax Equivalent to spouse credit, (GST), , Goods and Services Tax Estate freeze, 264 (GST) credit, 92 Examination fees, Goodwill, 61, 80, 147, 203, F Graduated rate estate, 290 Family caregiver tax credit, Gross-up, of dividends, 14, , 128 Family tax cut, Farming, see Hobby Farming H Federal abatement, 213-4, 226, Half-net rule, Hobby farming,

6 CFE Tax Holding period test, 150 Instalments Home accessibility tax credit, Corporations, Individuals, 94-8 Home Buyers Plan, 92, 130 Insurance Home office expense, , Disability, Health, 103 Life, 103, 209 Home relocation loan, 141, 176 Intangible assets, see Capital cost allowance, Cumulative I eligible capital Identical properties, 73-4 Integration, 13-6, Income inclusions, other, 133- Interest and penalties, 93-4, Income splitting Interest expense, 40 Attribution, 9, 129, Interest free or low interest Defined, loans, 188-9, 245, 247, see also Attribution; Taxable Eligible pension income benefits allocation, Interest income, 40, 128, 238, Spousal RRSP contributions, Interpretation Act, 92 Income Tax Act, 5 Interpretation Bulletin, 6 Income Tax Regulations, 5 Inventory, 199 Income, taxable, see Taxable income Investigation of site, 210 Individuals, 91-2 Investment income, see Refundable taxes; Property Infirm dependant credit, 169- income 70, 172 Investment tax credit, Information circular, 6 In-home care of relative J credit, 169, 172 Joint ownership, 9 312

7 Index Joint ventures, 302 Loss carryovers, 67, 211 Lottery winnings, see K Gambling winnings Kiddie tax, M L Manufacturing and processing Landscaping expense, 209 (M&P) deduction, Lease cancellation, 209 Meals and entertainment, 41, 205 Leasehold improvements, see Capital cost allowance Medical expense credit, Leases, 38 Mental or physical impairment credit, 132-3, Legal basics, , 136-7, 162-3, 170-1, Legal entity, Legal fees Motor vehicle, Appeals or objection re: Allowance for employment CRA notice of assessment, expense, Employer provided, Collection of salary, 118 Restrictions on deductible Collection of support expenses, 42, see also payments, Taxable benefits Representation expense, 210 Standby charge, Lifelong Learning Plan, 130 Moving expenses, 135-6, 139 Limited liability partnership N (LLP), Net-capital loss, 67 Limited partnership, 301 Carry over, 67 Listed personal property, 78 Net income for tax purposes Loans, see also Taxable Corporations, benefits; Shareholder loans Individuals, Basic tax treatment, Non-arm s-length, Home relocation, 141 Interest free or low interest Low interest employee, 141 loans,

8 CFE Tax Non-arm s-length (cont d) Options, 39, 70-1, Related person, defined, 87 Sale of shares to P corporation, Paid-up capital (PUC), Non-capital loss, 46-8 PUC reduction, Non-monetary transaction, see Part IV tax, 235-6, Barter transaction Partnership interest, 295, 297- Non-resident 8 Becoming a, rules, 26-7 Partnerships, 7, Deemed disposition, 28 Penalties, see Interest and Section 116 certificate, 33-4 penalties Trusts, 21 Pension adjustment, 127 Withholding tax, see Pension income, Withholding tax Pension income splitting, 131- Non-taxable receipts, Notice of assessment, 6 Pension credit, 159 Notice of objection, 6 Permanent establishment, 226- O 30 Off-calendar year-end, 101, Person, 8 191, 293, Personal expenses, 118, 203 Old Age Security (OAS), 123- Personal services business, 4, 131, Operating benefit, 104, Personal tax credits, see Tax Organization Chart, 10 credits Organizational forms of Personal use property, 78-9 business Political contributions, 174-8, Corporation, Partnership, 7-11 Prescribed interest rate, 95-6 Proprietorship, 7-11 Principal residence exemption, Trust,

9 Index Property income, 39, 40 Registered Retirement Income Property loss, 46-8 Fund (RRIF), 128-9, 131 Proprietorship, 8 Registered Retirement Savings Plan (RRSP), Proration, 24-5, 27, 58, 62, 83-4 Related persons, see Nonarm s-length Provincial allocation of taxable income, Reorganization of capital, Public transit passes credit, 165 Reorganizations, corporate, see Corporate Q reorganizations Qualified investments, 86, 124 Replacement property Qualified small business Eligible small business corporation (QSBC) shares, 86 shares, Rules, 84-6 Research grants, R Reserves, 42, Reasonable expenses, 40-1 Residence, see also Non- Recapture, 51-2, 62 resident Recreational facilities and club Becoming resident, 26-9 dues, 41, 203 Corporate residence, 26-7 Redemption of shares, Deemed, 26 Refundable dividend tax on Defined, hand (RDTOH), Determination of, Refundable taxes, Trusts, 21 Registered Disability Savings Restricted farm loss, 193 Plan (RDSP), Retiring allowance, 125-6, 133- Registered Education Savings 4 Plan (RESP), 132 Rights and things, 191 Registered Pension Plan (RPP), 123-9, 204 Rollovers, , see also Corporate reorganizations; Section 51 and

10 CFE Tax Rollovers (cont d) Share for share exchange, see rollovers; Section 85(1) section 85.1 rollover rollovers; Section 85.1 Shareholder benefits, rollovers; Section 86 rollovers; Section 87 Shareholder loans, rollovers; Section 88 Shares rollovers Common, 13 S Preferred, 13 Redemption of, Safe income, Specified class, Safety deposit box, 42 Small business corporation Salary and bonus accrued, (SBC), 80, , see also Allowable business Sale of a corporation, investment loss (ABIL); Corporate attribution; Scholarship income, 134 Qualified small business Scientific research and corporation (QSBC) shares experimental development Small business deduction, 214- (SR&ED), 204-5, Section 22 election, Soft costs, 55 Section 51 and 51.1 rollovers, Specified investment business, Section 84.1 rules, Specified shareholder, 246-7, Section 85(1) rollover, Spousal credit, 158, Section 85.1 rollover, 278 Spousal support payments, Section 86 rollover, Section 87 rollover, Spousal transfers, 79, 190 Section 88 rollover, Spousal trust, 291 Section 116 certificate, 33-4 Standby charge, Self-employment income Stock dividends, 115-6, 212, Tests to determine,

11 Index Stock options Education credit, Capital gain or loss, 70-1 EI and CPP contributions, Employee, 111-3, Stop international tax evasion, Equivalent to spouse, 158, , Examination fees, Stop-loss rules, 87, 90 Family tax cut, 172 Strike pay, 116 First-time homebuyers, 166 Stub period income, 101, 191 Foreign, Student loan interest credit, Home accessibility, Infirm dependant, , Subsection 55(2), Subsection 75(2), In-home care of relative, 169, 172 Subsection 84(1), 250 Medical expense, Superficial loss rules, 90, 264 Mental or physical Support payments impairment, 170-1, Child, 134 Pension, 159 Spousal, 134 Personal, 157 Political contribution, T Proration of, 83-4 Tax credits Public transit passes, 165 Additional amount, 170 Spousal, 158, Adoption expense, 170 Student loan interest, 164 Age, Teacher and early childhood Basic personal amount, 157 educator school supply, 173 Canada employment, 159 Textbook, 164 Charitable donation, Transfer to spouse, Child tax, 172 Tuition, Children s arts, 165 Volunteer firefighter, 171 Children s fitness, 165 Volunteer search and Dividend, rescue,

12 CFE Tax Tax rates Taxpayer, 6 Brackets (individuals), 155- Teacher and early childhood 6 educator school supply tax Corporate, credit, 173 General rate reduction, 214 Terminal loss, Proration of, 83-4 Terminal tax return, Tax returns Testamentary trust, Due dates, 91-4, 189, 195 Textbook credit, 164 Filing requirements, 91-4 Tradesperson s tools, 119 Penalties, 93-4 Terminal, Transfer of tax credits to spouse, Taxable benefits Transfers and loans, see also Automobile, employer Attribution provided, Indirect income, 188 Employee stock options, Minors, to, 185 Low (no-interest) loan, Rights to income, 188 employer provided, , Spouse, to, , see also Employee Travel expenses benefits Employment related, Taxable Canadian property, 20 Treasury shares, Taxable capital gain, 66, see Treaty, income tax, 20 also Capital gain Trusts, Taxable income, Tuition credit, Taxes owing U Due dates, 91-2, Undepreciated capital cost, see Taxes payable Capital cost allowance Corporation, Uniform Evaluation (UFE), 1, Individual, Tax-free savings account, 116- Universal Child Care Benefit 7, 191 (UCCB),

13 Index Utility service connection, 210 Section 116 certificate, 33-4 V Workspace in home, see Home office expense Vacant land, 40, Writedowns, see Asset Vesting, 126 writedowns Voluntary disclosure, 93-4 Y Volunteer firefighter tax credit, 171 Year-end, 8, 195 Corporations, 195 Volunteer search and rescue tax credit, 172 Deemed, 26, 27, 58, 280 Off-calendar, 101 W Partnerships, Windfall, see Gambling Trusts, 24, winnings Winding-up, Withholding tax, payments to non-residents, 30-1 Rental income,

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